TaxTMI 
TaxTMI 
2022 (6) TMI 1570
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....e case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was incorrect in holding that the MPS Limited is not a comparable relying on incomplete information provided by the assessee and information culled from the website of MPS Ltd. 3. On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) was incorrect in holding that MPS Limited was not functionally comparable without examining the functions performed by the assessee which are similar in nature to the assessee. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was incorrect in relying on the decision of the Banglore ITAT in the case of Google (India) Pvt. ltd. ignoring the fact that the assessee and MPS Ltd. performed similar functions. 5. For these and such other reasons as may be urged at the time of hearing, the order of the Ld CIT(A) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course appellate proceedings before the Hon'ble Tribunal." 4. Briefly, the facts of the c....
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....profit margins of said comparables was computed at 8.86%. According to the assessee company, its PLI was much higher than the arithmetic mean of the comparable entities. Hence, it was claimed that the international transactions with its AE are at arm's length. The assessee company had also chosen the following 8 entities as comparables whose average profit margin was computed at 8.86% using 3 years weighted data :- Sr. No. Name of Company Weighted average of OP/TC (%) 1 ACE BPO Services Private Limited 4.88% 2 Caliber Point Business Solutions Limited (Segmental) 5.22% 3 Comic Global Limited 18.73% 4 Datamatics Financial Services Ltd. 7.99% 5 Informed Technologies India Limited 6.21% 6 Jindal Intellicom Private Limited 1.33% 7 Micro genetics Systems Limited 18.08% 8 R Systems International Limited (Segmental) 8.43% Arithmetic Mean 8.86% 6. In respect of software development services, the assessee company's profit margin was computed at 18.38% and the assessee company claimed that the same was comparable with other companies rendering software development services. For the purpose of T....
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....r is 10 times lower or 10 times more than the turnover of the assessee are selected as comparable rest are excluded. d) Companies whose SWD service is less than 75% of the total operating revenues were excluded. e) Companies who have more than 25% related party transactions of the sales were excluded. f) Companies who have export service income less than 75% of the sales were excluded" 8. Applying the above filters, the TPO had rejected the 10 comparables and accepted 1 comparable i.e. Cigniti Technologies Ltd. selected by the assessee and finally selected the following comparables :- Sr. No. Name of Company Turnover (In Crore) Margin (%) 1 E-Zest Solutions Ltd. 37.73 14.53 2 Thirdware Solutions Ltd. 207.25 50.45 3 R S Software (India) Ltd 352.64 24.36 4 Cigniti Technologies Ltd. 55.52 27.37 5 Sasken Communication Technologies Ltd. 350.83 7.81 6 Cybercom Datamatics Information Solutions 14.70 85.47 7 Exilant Technologies Pvt. Ltd. 298.10 10.41 Average 31.48% 9. The TPO computed the average profit margin of the comparables finally....
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....ok. At page no.239, Note- 1A forming part of the financial statements, it is stated as under :- "About the Company ..... The Principal object of the Company is to act as consultants and advisors on information/internet system and surveyors of information services, and to carry on the business of development, testing, implementation, migration of home grown and other applications, marketing and manufacturing of information technology products and services, software and hardware systems to enterprise and embedded technologies in the telecom and other industries." 20. At page no. 237 income from operations was shown from sale of software services alone and at page no. 274 in Note-23 forming part of the financial statements for the year ended 31.03.2014, it is stated that the principal business of the company is of providing of technical and software services. All other activities of the company revolve around its main business. A perusal of the annual report of the said company clearly shows that it was engaged in providing technical software services, contrary to the assessee company which is engaged purely in rendering software development service....
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....ntly in the business of digital publishing which cannot be treated at par with ITes which is in the name of the assessee in ITes segment. In this regard, we find in the case of Emerson Electric Company (India) Private Limited Vs. ACIT (supra.) wherein the Co-ordinate Bench of the Tribunal, Mumbai held the MPS Limited as functionally not comparable by observing as follows: "9.3. From the perusal of the annual report for the year ended 31/03/2014 of the said comparable, we find from page 707 of the paper book that the said comparable had incurred outsourcing cost of Rs. 1078.76 Crores which is included under the head "miscellaneous expenses" which goes to prove that it has got a different business model. From the various functions performed by MPS Ltd., we find that the said comparable is predominantly in the business of digital publishing which cannot be treated at par with ITeS which is the case of the assessee in ITeS segment. In this regard, we find that the reliance placed by the ld.AR on the Co-ordinate Bench decision of Bangalore Tribunal in the case of M/s. Google (India) Pvt. Ltd., vs. DCIT in ITA No. 1368/Bang/2010 for A.Y.2006-07 dated 19/10/2012 is well founded w....
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....evant material on record, we find from the Annual report of this company that it is mainly engaged in e-publishing business. It has more than 10,000 classic books to its credit which are also converted into large font titles for visually challenged. Apart from e-publishing, this company is also engaged in Documents scanning & Indexing. It can be seen from the financial results of this company that both the segments viz., e-publishing and Documents scanning etc. have been combined and there are no separate financial results in respect of Documents scanning work, which may be comparable with the assessee to some extent. As the assessee is not engaged in any e-publishing business and the financials given by this company are on consolidated basis, we direct to exclude this company from the list of comparables. The assessee succeeds." 22. We further observe that the Ld. DRP held MPS Limited as BPO Company and is engaged in ITes only. In this regard, the Pune Bench of the Tribunal in the case of Macom Technology Solutions (India) Private Limited Vs. DCIT in ITA No. 2393/PUN/2017 for A.Y.2013-14 vide its order dated 08.08.2019 discussed the definitions as provided under Rule 10TA....